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How to start truly saving money

Every year, many households overspend at Christmas, and then make New Year’s resolutions where they vow not to repeat their mistakes and restore some financial balance to their lives.

But saving regularly is easier said than done. So how can you make your resolutions last, and start truly saving money? According to the experts there are a few basic tips and rules that work.

Putting some money aside is a crucial part of sound and balanced personal finances, but far too many households either don’t manage to save or in some cases simply don’t have the capacity to do so. In addition to this, the tendency and ability of people to save for retirement, or to create a financial buffer for unexpected expenses or a new car varies greatly across the European Union. In the EU as a whole many households tend to save too little, if anything at all. In the monthly EU consumer confidence survey just over half of the households say they are unlikely to be saving anything over the next 12 months. 

“A problem is of course that those households that most need to save some money are those that have the greatest difficulty in doing so,” says Arturo Arques, a personal finance expert and advisor at leading Nordic financial group Swedbank.

In northern and western Europe the number of people saving is at its highest, with around three quarters of Swedish households stating that they are saving. Meanwhile, southern and eastern Europe, with countries such as Greece, Italy and Romania, dominate the lower half of the list.

“The southern and eastern European economies experience substantial problems which affect the ability to save, but people want to save and if you have an income, even a small one, you can almost always save at least a little. Even setting aside 10 Euros a month can make a difference in building a buffer,” says Arturo Arques.

Intrum Justitia’s latest European Consumer Payment Report also illustrates the lack of saving and financial buffers for many, as it shows that a growing portion of Europeans are feeling pressured by debts and more and more people are saying that they are unable to pay their bills on time. As many as 27 per cent of all Europeans say they are sometimes unable to pay their debts, and households’ inability to pay bills on time has increased since last year, according to the 2016 report.

Personal finance advisors agree that having a financial buffer that can meet unexpected costs, such as unusually large bills, medical or dental costs, or which can meet the cost of replacing essential domestic appliances, is the most important goal. We have talked to several experts and below we sum up their advice on how to save and how to ensure you have sound personal finances:

    • Have a financial buffer for unexpected expenses. Ideally this should be the equivalent of one year’s salary but anything is better than nothing. If it is used then make a plan for how you can replenish it.
    • Make sure you have adequate protection against income loss, such as unemployment insurance. Basic coverage is typically provided by the government but additional coverage is often available through trade unions or on the open market.
    • Set up specific goals for your saving and save regularly, ideally every month. Decide a percentage of your income that should be saved, maybe 5 or 10 percent. If you get a pay rise then set half of that aside for saving and use the other half to brighten up your everyday life.
    • If you feel there is absolutely no room to save then take a close look at your household expenses. Make a budget and try to make room for saving at least a small amount.
    • Diversify your saving. A financial buffer for unexpected expenses should be easily available and be low risk, while your pension savings can have a higher risk in order to achieve a better return. Targeted saving to buy the likes of a new car should be somewhere in between, with limited risk.
    • If you have expensive loans then these should be paid off first, while it is better to save than pay off house mortgages with often very low interest rates.

(The above advice is compiled from input from Swedbank, Skandia, SBAB and Handelsbanken).

By following some of these tips, the New Year’s Resolution you make this time around can be something that you can truly stick to in the year ahead. Then 2017 can be the time when you finally start to save money.